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Thursday, April 12, 2012

Publisher statements

The Department of Justice suit

Penguin Group ceo John Makinson issued a statement about the lawsuit his company faces from the Department of Justice and a group of attorneys general on Wednesday afternoon. He writes: "A responsible company does not choose a path of litigation with US Government agencies without carefully weighing the implications of that course of action." But, Makinson says, "we have done nothing wrong. The decisions that we took, many them of them costly and difficult, were taken by Penguin alone." As for Justice's complaint filed today, "the document contains a number of material misstatements and omissions, which we look forward to having the opportunity to correct in court."

Additionally, Makinson reiterates that "the agency model is the one that offers consumers the prospect of an open and competitive market for e-books. We understood that the shift to agency would be very costly to Penguin and its shareholders in the short-term, but we reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well.... The decision we took in January 2010 to move Penguin’s e-book business to agency pricing has been vindicated by the very rapid subsequent growth in the volume of e-books sold by agency publishers, and by the benefit to consumers of the steep decline in the price of e-book readers that that has resulted from this open competition."

Makinson also says that "alone among the publishers party to the investigations that resulted in today’s announcements, we have held no settlement discussions with the DOJ or the states."

In other statements, ABA ceo Oren Teicher said: "Today's DOJ filing is baffling. Following the implementation of the agency model at the end of 2010, the ebook market has become more competitive. There is more -- not less -- competition among retailers, and more -- not fewer -- examples of marketing and promotional efforts among publishers that have reduced prices. For the Department of Justice to challenge a business model that played an essential role in fostering a more competitive, diverse retail environment seems to turn logic on its head and is not in the best interest of consumers."

And from John Sargent at Macmillan:

Dear authors, illustrators and agents:

Today the Department of Justice filed a lawsuit against Macmillan's US trade publishing operation, charging us with collusion in the implementation of the agency model for e-book pricing. The charge is civil, not criminal. Let me start by saying that Macmillan did not act illegally. Macmillan did not collude.

We have been in discussions with the Department of Justice for months. It is always better if possible to settle these matters before a case is brought. The costs of continuing--in time, distraction, and expense-- are truly daunting.

But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

When Macmillan changed to the agency model we did so knowing we would make less money on our e book business. We made the change to support an open and competitive market for the future, and it worked. We still believe in that future and we still believe the agency model is the only way to get there.

It is also hard to settle a lawsuit when you know you have done no wrong. The government's charge is that Macmillan's CEO colluded with other CEO's in changing to the agency model. I am Macmillan's CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.

Other publishers have chosen to settle. That is their decision to make. We have decided to fight this in court. Because others have settled, there may well be a preponderance of references to Macmillan, and to me personally, in the Justice Department’s papers – often without regard to context. So be it.

I hope you will agree with our stance, and with Scott Turow, the president of the Author's Guild, who stated, "The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support".

Since we are now in litigation, I may not be able to comment much going forward. We remain dedicated to finding the best long term outcome for the book business, for Macmillan and for the work you have entrusted to our care.